Direct Line (DLG) has reinstated its dividend payments at the half-year mark, while compensating for the April cancellation of the 2019 final dividend by announcing a 14.4p special dividend, which gives an underlying yield of 4.5 per cent. That earlier cancellation and suspension of a £150m share buyback boosted the insurer’s solvency capital ratio. But even factoring these new payments, the measure stands at a healthy 192 per cent, a result of strengthening capital generation and the issue of £260m of Tier 2 debt.
The group said the impact of Covid-19 had been “broadly neutral”, as proportionally higher operating costs and lower investment had been largely offset by a sharp reduction in motor vehicle claims as the number of car journeys plummeted.
The motor vehicle segment, which accounted for roughly a half of written premiums through the period, registered a dramatic fall in claims as a proportion of premiums. That meant the group’s combined ratio of 90.3 per cent improved by 2.2 percentage points on the 2019 year-end, even though the rescue/personal lines unit lagged the other parts of the business over that period. Underwriting profits have continued to improve since the period-end despite additional costs incurred in response to the pandemic.
The consensus forecast for adjusted EPS stands at 22.67p, rising to 27.2p in 2021.
| DIRECT LINE (DLG) | ||||
| ORD PRICE: | 326p | MARKET VALUE: | £4.43bn | |
| TOUCH: | 325.9-326.4p | 12-MONTH HIGH: | 355p | LOW: 225p |
| DIVIDEND YIELD: | 0.1% | PE RATIO: | 2 | |
| NET ASSET VALUE: | 203p* | COMBINED RATIO: | 90.3% | |
| Half-year to 30 June | Gross earned Premiums (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2019 | 1.59 | 261 | 14.9 | 7.2 |
| 2020 | 1.59 | 236 | 13.6 | 7.4 |
| % change | -0.3 | -10 | -9 | +3 |
| Ex-div: | 13 Aug | |||
| Payment: | 4 Sep | |||
| NB: 2020 interim payout does not include special dividend of 14.4p. *Includes intangible assets of £741m, or 54.5p a share | ||||
